Hi everyone,

Here's a great article about the US minimum wage laws and why the left is
exploiting them.  It's an older 
article but the facts still speak for themselves.

From:
https://theweek.com/articles/616528/democrats...

===
Democrats have lost their minds over the minimum wage
Shikha Dalmia

A higher proposed minimum wage is causing a stir among Democrats.
April 11, 2016

President Obama got the ball rolling when he called for hiking the federal
minimum wage from $7.25 to $10.10 
per hour. Now, both Democratic presidential candidates are trying to one-up
him, with Bernie Sanders demanding 
a $15 federal wage and Hillary Clinton $12. Meanwhile, California and New York
have already passed laws 
mandating the Bernie rate, and scores of cities across the country are
clamoring to follow suit.

And all the while, minimum wage advocates are making increasingly fanciful
claims on behalf of their beloved 
laws.

The left's minimum wage obsession dovetails with a shifting academic consensus
that until the 1990s considered 
such hikes a recipe for killing jobs, especially for low-skilled workers. For a
long time, the generally 
accepted rule of thumb was that, all else remaining equal, every 10 percent
increase in the minimum wage would 
decrease low-skilled employment by 1 to 2 percent, since the more employers had
to pay these employees, the 
fewer jobs they could afford to provide.

This consensus began to fray with a 1992 study by economists David Card and
Alan Kreuger, who found that New 
Jersey's minimum wage hike  from $4.25 to $5.05  did not lead to expected job
losses in the state's fast food 
restaurants. This finding has been hotly contested, but even if it were true,
it doesn't mean there are no 
other downsides to minimum wage laws. For example, sometimes employers don't
respond to minimum wage hikes by 
laying off workers, but instead by raising prices for consumers. (Minimum wage
opponents haven't helped their 
case by hitching it almost exclusively to job losses while ignoring the other,
equally pernicious, adjustment 
responses by businesses.)

There is only one scenario, according to Naval Postgraduate School economist
David Henderson, under which a 
modest legally mandated minimum wage might do more good than harm: when
employers enjoy monopsony power (a 
monopoly on the buying side) in the labor market, either because there are very
few of them or because workers 
can't leave for some reason. Employers then have a relatively free hand to hold
wages down. A mandated minimum 
wage under those circumstances merely diverts the firm's "excess profits" to
the worker, something that would 
have happened automatically in a more competitive market. But it doesn't
diminish a company's productivity or 
its incentive for additional hiring  thereby actually boosting job growth. But
genuine monopsony isn't common 
and would require a very finely calibrated and skillfully crafted minimum wage,
which is not how blanket 
policies work in the real world.

America's federal minimum wage of $7.25 per hour works out to about 42 percent
of its $17.40 hourly median 
wage. Even the most gung-ho academics only advocate raising it to 50 percent of
the median  which means a 
little over $8.70. This in itself is a crude benchmark that lumps together
high-wage service occupations with 
low-wage construction and other non-service ones whose market realities are
completely different. Be that as 
it may, it is inconceivable that a $15 minimum wage  equal to 86 percent of
America's median wage, and the 
highest in the Western world  wouldn't kill jobs, especially in small towns and
cities where wages tend to be 
lower. Witness the chronic double-digit unemployment rate that a far less
insane minimum wage has generated in 
France, Spain, Belgium, and other European countries.

And yet, minimum wage enthusiasts are abandoning all caution and making
increasingly extravagant claims. Here 
are four of their sillier arguments:

False: Minimum wage hikes will lead to productivity-boosting automation

The standard rap against minimum wage laws is that by raising the cost of
hiring workers, they prompt 
companies to invest in labor-saving technologies, throwing people out of work.
But Matthew Yglesias claims 
that this would by no means be a "bad thing." Why? Because productivity is the
engine of economic progress. 
And if machines are more productive than people, then policies that prod
employers to replace people with 
machines would mean more wealth without toil for everyone. This is the reverse
of the Luddite fallacy that 
seeks to boost jobs by eschewing labor-saving technologies. Nobel laureate
Milton Friedman once heard a Third 
World bureaucrat, suffering from this fallacy, defend his decision to have poor
workers dig a massive canal 
with shovels rather than earth movers because that meant more jobs. Friedman
asked: Why don't you replace 
their shovels with spoons?

Increasing productivity is not simply a matter of increasing output, but doing
so in the most cost-effective 
way. You do not encourage that with policies that force investments in capital
equipment when labor is 
plentiful. Indeed, this raises the overall opportunity cost, rendering an
economy less efficient. If Friedman 
were alive, he may well have asked Yglesias why, by his logic, he doesn't just
advocate a ban on all manual 
labor.

False: Minimum wage hikes helps firms make more money

This claim strains credulity. How would a $15 mandate that almost doubles a
company's labor costs actually 
boost profits? The argument that former Labor Secretary Robert Reich offers is
that higher wages means happier 
employees and lower turnover, something that saves a company money. If so, the
million-dollar question is why 
aren't greedy companies doing this already? Are they too stupid or sadistic or
both to pass up on a win-win 
deal for both themselves and their workers?

False: Minimum wage hikes will stimulate the economy

Michael Reich, an economist at the University of California, Berkeley, claims
not only that a $15 minimum wage 
wouldn't produce job losses in the short run, but would actually stimulate the
economy, resulting in job gains 
in the long run. "They'd (employees) have more money to spend, the overall
level of demand for goods and 
services would be higher, and so would the level of employment," he claims.

But shifting wealth around doesn't generate real economic growth. Boosting
productivity does. Indeed, ordering 
employers to give artificial raises means that they would have less money to
spend or invest, cancelling out 
any extra spending by workers.

False: Minimum wage hikes will diminish the strain on welfare programs

Advocates of the minimum wage claim that without a suitably high minimum,
low-income workers are forced to 
rely on food stamps and health care programs to make ends meet. In essence,
they argue, welfare programs end 
up subsidizing McDonald's low-wage workforce, which is hardly fair to
taxpayers. Forcing companies to pay 
something resembling "living" wages would diminish low-wage workers' dependence
on government programs.

This assumes that boosting the minimum wage would hand more workers a raise
than it would throw people out of 
work, of course  which is hardly a reasonable assumption, as pointed out
earlier. Indeed, notes University of 
California, Irvine's David Neumark, the probability that a family will escape
poverty due to higher wages will 
be offset by the probability that another will enter poverty because it has
been priced out of the labor 
market.

The core fallacy in this line of reasoning is that employers can set wages
based on employee needs rather than 
market forces. Hence, they can simply be forced to hand over more money to
their workers. That, however, is 
not how things work, especially in a globalized world where forcing employers
to cough up wages higher than 
the market can bear would undermine their competitiveness  not something that
helps anyone in the long run.
===

Later,
Sean
 
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